Be Valuable a Guide to Creating Value in the Built Environment

Be Valuable A guide to creating value in the built environment by Richard Saxon CBE Foreword ‘Be Valuable’ was born from a workshop held by Be’s predecessor the Reading Construction Forum in 2002 on the subject of ‘Designing the Future’. Richard Saxon became a most articulate and convincing champion of ‘value’ and ‘integrated solution providers’ and carried the themes forward into Be. Thus, when nCRISP were looking for a champion to run a working group on value in 2004, Be was the natural partner and Richard the obvious choice to chair it. That group’s illustrious and powerful membership produced for nCRISP a separate, complementary report to this one, focusing on a research agenda. Richard remained convinced that value was a powerful but poorly understood concept, and he has produced this report to demystify it. We are enormously grateful to Richard and his report is an appropriate testimony to his leadership both of Be and in the wider industry. The report complements the work of other organisations such as the Commission for Architecture and the Built Environment and the Office of Government Commerce, to all of whom we are extremely grateful for their support and endorsement. Be is now a part of Constructing Excellence in the Built Environment and as such we already have plans for future work with these organisations, our members and other stakeholders. Our vision is of a demonstrably better built environment delivered by an industry which, to paraphrase Richard on page 12, knows much more of how it adds value. If after reading this report you share that vision, please do contact us and get involved. Don Ward Chief Executive of Be and Deputy Chief Executive of Constructing Excellence in the Built Environment The ‘value’ debate has been central to CABE’s work since publishing ‘The Value of Good Design’ in 2001. This provided evidence of the economic and social benefits of good design for a number of different sectors, including healthcare, education, housing, civic projects, and the commercial sector. ‘Be Valuable’ updates this evidence gathering, but more radically explores how different sectors of the built environment profession and academia have developed concepts, methodologies and tools for valuing design, and the roles of different stakeholders in creating value. The construction industry has understandably tended to approach value in a single dimensional way – whereas the reality is of a far more complex picture. ‘Be Valuable’ starts to address this complexity and talk about the existing tools and approaches. Increasingly it is understood that to aim for a single methodology in order to measure and demonstrate value in the built environment is a fool’s errand. Understanding the tools is not enough; we need to share a common language and belief in the value of design. Thus there is a need to transfer new knowledge on the value of good design, targeting a particularly broad audience. CE’s ability to talk to all sectors of the industry and its links with the Government bring together differing views and approaches to assessing and understanding value. The report identifies that this is an issue that crosses professional boundaries, and identifies actions for us all. ‘Be Valuable’ sets the agenda for ongoing work for CE, CABE, and others committed to exploring this critical issue further. Richard Simmons Chief Executive of the Commission for Architecture and the Built Environment The report ‘Be Valuable’ is a very helpful and clearly written contribution to a crucial aspect of procurement. Over recent decades there have been wild swings in the balance between the two most important aspects of procurement – the quality and the cost. This report sets out concisely and authoritively how essential it is to assess from the start of procurement the through-life quality that is needed, in terms of benefit afforded by the building, even although it is very difficult to quantify the benefits, and even to be accurate enough about the life-time costs in some types of building. The report shows how clients have to give and require high priority to be given to not just to assessing and minimising whole-life cost, but also to assessing and maximising whole-life value. Fixation solely on costs, or compliance with self-set budgets, is shown not to be acceptable in any society that sets high store by sustainability – to procure the wrong building cost-effectively is a waste of money. David Adamson Office of Government Director of Estates, University of Cambridge, seconded to the Office of Government Commerce (OGC) Commerce (OGC) H M Treasury, as Director of Smarter Construction. Contents 1. Executive summary 1 2. Introduction. ‘Value’ replaces ‘cost’ as the key term 2 3. The concept of value: defining terms 6 4. How built environment contributes value 12 5. How value can be defined for a project 20 6. The ratio between building cost and business value 26 7. Integrated solutions to providing value in the built environment 34 8. Actions for all 40 Appendix Membership of the Be/nCRISP Value Task Group 47 Select bibliography on value and intangibles 48 Photo credits 50 1. Executive summary The Be Valuable report aims to help customers of and suppliers to the huge industry that is the built environment. Be define the built environment as embracing all inputs to the provision of managed space and infrastructure for public and private use: property investment and development, design, construction and facility management. The tradition across this complex of industries has been to manage for cost minimisation rather than for value optimisation. Optimising value, the product of benefits sought over sacrifices required, is a far more rewarding strategy for all stakeholders. The report also suggests that built environments be seen as working assets rather than as physical artefacts. The report explains the subjective nature of value and of stakeholder viewpoints. It suggests a vocabulary to use. The way built environment provides value to the economy, society and the natural environment is explored, noting the lack of research so far to provide evidence. Tools for measurement are discussed. Ways in which projects can define their value goals and achieve them are set out, improving on the usual quality of brief making. The amount spent on buildings, in initial capital and in use, is small “Not everything compared to the value added by their occupants. The focus that counts can be should be on enabling occupier performance and minimising whole life costs. The ratios between initial cost (C), lifetime facility counted; and not management cost (F) and lifetime occupant value added (VA) everything that can are instructive. be counted, counts.” There is a rising demand from customers to buy integrated Sign in Albert Einstein’s office at solutions to complex needs. Built environment supplies embrace Princeton consultancy, finance, design, construction, equipment and operation and need expert buying. The Private Finance Initiative (PFI), and its corporate counterparts, are opening up new business models for life-cycle value creation. The report concludes with advice to each group of stakeholders and a recommended programme of research and support action to liberate more value for all involved. Common factors are the need to measure and learn from projects in use to improve front end advice and design. The off-line learning and skills functions of all participants need to be stronger, to empower the project team. Strong evidence of reward from new thinking will accelerate and embed change. 1 2. Introduction: ‘Value’ replaces ‘cost’ as the key term Value is a much-used word at present. Government seeks to buy ‘best value‘ and ‘value for money’; shoppers head for the ‘value‘ sector of the market; entrepreneurs start up businesses based on a ‘value proposition’. All these usages are (slightly) different in their meaning. This publication is aimed at customers in and suppliers to the This publication aims built environment, a broad and central area of the economy to crystalise which we shall define. It aims to crystalise knowledge in 2005 on the subject of value in the built environment, to make it knowledge on the useful for participants in their current work and to show where subject of value in the research is likely to lead in the near future. built environment. The era since World War II in UK property and construction matters has until recently been ruled by the word ‘cost’. Buildings were designed down to a budget by consultants, then tendered for by contractors with the lowest cost tender winning. Minimising capital cost allowed developers to maximise profit, provided they produced an acceptable quality of product. Low capital cost in public buildings was the obvious way to increase the quantity of hospital beds, school places or council houses. There was a near-complete absence of consciousness of two other factors: the effect of the building on its occupants’ performance and well being and the lifetime operating costs of the building. Buildings were always in short supply so there was rarely competition on standards which became the minimum acceptable to a low-aspiration society. Good value in that era was defined as getting ‘it’ for the lowest possible price. ‘It’ was a generic, commoditised view of building, sufficient to get planning permission, pass building regulations and meet yardstick areas and specification for its function. 2 Breaks in the cloud began in the 1980’s. Commercial landlords began to realise higher rents for premium developments, ones which served more demanding markets such as ‘big-bang’ city offices or enclosed-mall shopping centres. Higher costs were more than recovered as tenants saw the additional value in these developments: they could use the latest equipment and layout ideas and draw in custom more competitively, justifying higher rents.

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